Cross-posted from Investing in Chinese Stocks.
Property developers are being starved of finance, China Property Agony Deepens as Trust-Loan Lifelines Cut:
Issuance of property-related products, which channel money from wealthy individual investors, tumbled 62 percent from a year earlier to 38.5 billion yuan ($6.2 billion) in the fourth quarter, data compiled by research firm Use Trust show. Builders must repay 241 billion yuan of trusts in 2015, up from 178 billion yuan last year. Kaisa, which missed a bond coupon payment this month, failed to repay a 2.5 billion yuan trust last week, people familiar with the matter said.
And the PBOC is facing increasing capital outflows, China Switches to Supporting Yuan as Outflows Mount:
After more than a decade of curbing the currency’s gains to help turn the nation into a manufacturing colossus, there are signs the People’s Bank of China is now propping up the yuan to stem an exodus of capital that’s threatening the economy.
A gauge of capital flows on the PBOC’s balance sheet fell by the most since 2003 last month in a sign it’s selling foreign currency, while the yuan’s reference rate set daily by policy makers is at its strongest-ever level compared with the market price.
Flashback to June 2014, Real Estate Trust Problem Stretches into 2015; Too Early To Say No Crisis:
The trusts, which channel money from wealthy individuals to smaller builders that have trouble obtaining financing elsewhere, must repay 203.5 billion yuan ($32.7 billion) in 2015, according to Use Trust, a Chinese research firm. That’s almost double the 109 billion yuan due this year. New issuance of the products slumped to 40.7 billion yuan this quarter, the least in more than two years, Use Trust data show.
As for the yuan and PBOC reserves, one or the other is set to tumble.
Meanwhile, senior official, Liu Shijing, says China’s Real Estate Turn Is Not Cyclical. China needs two to three years for the economy to bottom from the time when investment bottoms. A soft or hard landing in real estate is possible based on international experience, 刘世锦：住宅需求峰值已达到 房地产处历史拐点:
Deputy director of the Development Research Center of the State Council in Beijing, said Liu Shijin on the 24th, the current Chinese real estate is not cyclical, but are at a historic turning point.
Liu Shijin in the sixth China Economic Outlook Forum sponsored by the China Economic Times made the above remarks.
Recently, some real estate experts, including many influential people believe that China’s real estate market is cyclical current estimated price of real estate in September 2015 at the line, but Liu Shijin do not agree.
In Liu Shijin view, China’s real estate market is at a historical turning point. “History of urban residential peak demand is 1.2 – 1.3 million units, this figure has reached 2014, after reaching there will gradually go flat, gradual downward trend, so our view is very clear, China’s real estate is in historic turning point. “Liu Shijin said.
For the trend of prices, Liu Shijin that from the whole country, there will be a certain level of overall prices down, but the price will be significant changes in the regional characteristics.
For example, he said, even the United States more than a dozen states have offices in Beijing, we can understand why the Beijing housing prices down get down. But now, many places are like Erdos (8.67, -0.08, -0.91%) like a ghost town, the local prices and Beijing is certainly not the same, so the rate change has obvious regional characteristics.
Decline in real estate, in the end is the short term rapid fall in the end, or the gradual decline in the fluctuations? Liu Shijin reminder, this thing is now not sure, from the international experience, both of which are, in the end is how Chinese form, you also need attention.
Liu Shijin that now infrastructure and export growth which two “Boots” has landed, real estate investment has retreated, after bottoming only other real estate investment, high investment will be bottoming out, the high growth of the Chinese economy will bottoming bottoming one to two years estimated time, no more than three years.
National Bureau of Statistics latest figures show that in 2014 China’s real estate development and investment fell 9.3 percentage points more than in 2013, real estate sales fell 7.6 percent, commercial housing sales fell 6.3%, real estate for sale in the area increased by about 129 million square meters more than at the end of 2013.
He also said interest cuts are weak in stimulating China’s real economy:
“Considering the overcapacity in many industries, interest cuts may cause huge capital flow into stock markets other than supporting real economy,” said Liu Shijin, deputy head of the Development Research Center of the State Council, China’s cabinet.
He said the deflation risk in China comes from shrinking demands and excessive production instead of insufficient money supply, which is totally different from the cases in mature markets like the United States.
“Stimulus is not opposite to reforms,” he said. “China’s current fiscal policies are effective in improving demands through increasing infrastructure investment.”
Other parts of the Chinese Governments Getting Serious About Bailouts and Growth. Over the weekend, two Chinese cities rolled out major policies to spur the economy and bailout the housing market.
The most important news comes from Fujian province. In Fuzhou, the city government is implementing one of the Ministry of Housing ideas for absorbing housing inventory, offering to buy empty houses from city residents. Homes between 45 and 135 sqm can be sold to the government at a discount of at least 15% from the market price.
The full impact of this policy is hard to predict. This is good news for lenders, since housing speculators can repay their loans, but the effect on the housing market is less clear. Once the government has the homes they will face pressure to generate cash flow. Renting them out will put downward pressure on rental prices and satisfy rental demand, potentially relieving some demand from home buyers. In high demand areas, the plan could bear dividends as former ghost cities are brought to life and increase overall demand. In less attractive areas (the under developed, uncompetitive fourth-tier cities), the government may achieve nothing except the concentration of risk on the municipal balance sheet. iFeng: 福州统购市民余房 商品房价低于市场评估价15%以上
Hangzhou is offering subsidies of up to ￥1 million ($161,000) to highly skilled individuals who purchase a home, and they can also receive a ￥30,000 subsidy ($4800) on car purchases.
There are five classes of talent, from A to E. A top level A talent is a global talent. B is a national talent. C is a provincial talent. D is a municipal talent. E is for high level talent. The A class talent will be assessed individually, B class can receive the ￥1 million housing subsidy.
For example, for A class talent will take one person, one proposed solution to the housing problem; for B, C, Class D personnel there are ￥1 million, ￥800,000, ￥600,000 in housing subsidies; E class talent can receive ￥1200 / month rent subsidies.
Global entrepreneurs who launch innovative new companies can receive a ￥5 million subsidy, while a team of entrepreneurs can earn up to ￥20 million. A major groundbreaking project can receive up to a ￥100 million subsidy.
This policy is very aggressive and signals some concern about the economy, but it is a smart way to attract talent. On the plus side, Hangzhou, and Zhejiang province more broadly, is also friendly to private capital and entrepreneurship. This isn’t an unfriendly, high tax, high regulation area trying to lure in businesses. It’s a capitalist-friendly city looking to grow its way out of trouble. iFeng: 杭州出台人才新政 买房政府最高补贴100万
The People’s Daily days the housing market will not collapse, and will hopefully rebound in 2H 2015.
The current volatility of the property market in some people’s eyes has been exaggerated as a prelude to the collapse. Experts believe that the real estate “crash,” said to be worried over. On the one hand, there is still a lot of macro-economic development potential; on the other hand, the rigid requirements to support the property market will move. ICBC chairman Jiang Jianqing said the mainland Chinese real estate has always been a very strong demand, excessive inventory places may need to make adjustments, but after a period of time to adjust to reach a steady state of equilibrium, will not pose a significant risk.
“Historically, Japan and the US real estate bubble are generated in the urbanization rate has reached more than 75 percent, and economic growth is slow, but there is still room for development of urbanization in China, and the economy has maintained rapid growth, so the crash occurs unlikely. “Director of the National Development and Reform Commission reform and development of cities and small towns Tie Center said. iFeng: 人民日报：中国楼市不会崩盘 下半年有望再回暖
But Zhang Xin of SOHO China rebuts the urbanization drive, China property tycoon calls top of urbanisation drive:
“By now, most of the cities in China are built,” she said on the fringes of the World Economic Forum in Davos. “Even small towns are quite built. So I think the intense urbanisation has come to an end.”
In the piece, she sounds optimistic about the government’s ability to manufacture GDP out of Chinese savings, but addressing Kaisa she says, “Instantly, the debt market is gone.”
Finally, in other housing news, Beijing says affordable housing policy is history. Beijing started building affordable housing in the 1990s. The price was held at ￥4,000 per sqm and there were strict income restrictions on who could live there. After this year, all of the wait-listed families will be able to buy homes and the city will end the policy. Going forward, the city will help low income residents rent public housing. iFeng：北京不再新建经适房 4000元经适房将成历史
